Consumers mustn't be victims of bank reform

Monday 19 December 2011 11:51 BST

The Government's official response today to the Independent Commission on Banking's report on the future of banking is unlikely to contain many surprises. The report was published in September, since when it has been the subject of ferocious lobbying by the banks to water down its recommendations. Already their implementation has been delayed until 2019.

George Osborne has little choice but to accept the report's central recommendation, that the banks separate their investment and retail banking operations, although proposals on banks' cash cushions may not survive. How far such provisions can prevent a new crash is in any case uncertain.

Some of the banks most exposed to the sub-prime crash - notably Northern Rock - did not conduct investment bank-style "proprietary trading".

The reforms may not be good news for consumers either. Banks will pass the costs of such changes on to customers. These will come at a time when the environment for borrowers, especially first-time buyers, is tough. Today's Financial Services Authority proposals on mortgage lending, intended to curb the sort of risky lending that contributed to the crash, will make getting a mortgage harder for some. As the fallout from the banking crisis continues, it is likely to be consumers rather than bankers who are the losers.

Nuclear enigma

The death of North Korean leader Kim Jong-il brings fresh uncertainty to one of the world's most delicate stand-offs. There has been growing tension over the past two years. In March last year, a North Korean submarine sank a South Korean naval vessel, and in November the North shelled the South Korean island of Yeonpyeong. Meanwhile the policy of the international community and above all the US has been to try to isolate North Korea while also engaging with it in an effort to persuade the regime to give up its nuclear technology.

It is hard for anyone to assess what route the new leader, Kim Jong-il's son Kim Jong-un, will now take. North Korean rhetoric is bellicose, but in fact over the past decade the regime has shrewdly played off the Americans against its only real ally, China, while at least some of the time giving the US enough signs of concessions to get food aid. Relations have worsened since North Korea's decision in August 2008 to restart activity at its Yongbyon nuclear facility and its testing of a nuclear device in 2009. We must hope the regime retains enough pragmatism to engage with the rest of the world and avoid a confrontation involving this oddest of nuclear powers.

Fares tussle

The Mayor's floating of the idea of cheaper early-morning Tube fares is worth exploring. Although he has made clear that any such shift is still a long way off, lower fares for those finishing their journeys before 7.30am would help some low-paid workers.

The proposal is also a sign of the increasing tempo of the campaign for next year's mayoral election. Ken Livingstone has pledged to cut Tube fares for six months from next October and then freeze them for a year; the Mayor has responded by claiming the cut is unaffordable. We can expect more such tussles in the month ahead, as what will be the biggest British electoral battle of 2012 gets under way. If that results in lower fares, that will be all to the good.